Supply Chain Management And Information Technology

Supply Chain Management and Information Technology

This paper will discuss how to achieve the benefits of cost reduction and profits through the utilization of information technology and information systems by examining processes between buyers and sellers, along with the supply chain.

As information systems technology advances, supply chain partners can now work together to optimize performance. A basic enabler for coordination is information sharing, which has been greatly facilitated by the advances in information technology.

In traditional supply chain management, orders are the only information exchanged, but information technology now allows demand and inventory data to be quickly and inexpensively shared. This paper discusses the importance of sharing data by utilizing information systems.

What is supply chain management?

Supply chain management (SCM) is the control of materials, data, and funds as they move in a process through to the end user. Supply chain management involves coordination and transformation of flows both within a company and between companies. The ultimate goal of any successful supply chain management system is to reduce inventory. Companies are implementing sophisticated software systems to have a successful supply chain.

Supply chain management flows can be divided into three main flows:

Ð'* The product flow

Ð'* The information flow

Ð'* The finances flow

The product flow includes the transfer of goods from a supplier to a purchaser. The information flow involves placing orders and providing the status of delivery. The financial flow consists of payment terms, payment schedules, and ownership arrangements.

What does supply chain management software do?

Supply chain management software is possibly the most broken collection of software applications around. Each of the major supply chain steps composes dozens of specific tasks, many of which have their own specific software. Some have assembled many of these different chunks of software together as one, but there is not a complete package that is right for every business. For example, most businesses need to follow demand, supply, scheduling, and distribution. Businesses also need to share data with supply chain partners.

There are two main types of SCM software:

Ð'* planning applications

Ð'* execution applications

Planning applications use sophisticated mathematical formulas or computer programs to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

Some SCM applications are based on open data models that support the sharing of data both inside and outside the company. This is known as the extended enterprise, which includes top suppliers, manufacturers, and end customers. This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies.

By sharing this data, SCM applications have the opportunity to improve the production schedules, reduce costs, and allow all parties in the supply chain to plan for future needs.

What is the goal of installing supply chain management software?

Prior to the Internet, the objective of supply chain software followers were restricted to improving their ability to forecast demand from customers and make their own supply chains operate more efficiently. But the presence of the Internet, along with its simple principles has opened up new opportunities. Now, businesses can connect to each other’s supply chains (Business to Business). This was the reason for the B2B sudden increase.

Today, most businesses share at least some data with their supply chain partners. The goal of these projects is greater supply chain visibility. In many cases if a company wants to business with another company they must be open to share data.

Web-based applications are not only creating greater visibility, but they also provide a convenient way to procure products. Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where end-users can make purchases. Many companies use tools such as this where the end-user can go online and order material with a Purchasing Card.

Additionally, companies may use the web to hold Reverse Auctions. A Reverse Auction is an electronic bidding process with a specified date and time for the bidding to occur. The Reverse auction is held on the Internet through a bidding service website. Bidders must have access to the bidding services web site, standard Internet Service Provider (ISP) connection and a web browser. The Reverse Auction is a “dynamic” event wherein the supplier is able to see the lead (low) bid in the system and the supplier will have to place a bid lower than their previous bid but not necessarily lower than the leading bid. Bidding is done on a per “Lot” basis as explained later. The bidders only see the quotes/bids on the screen and not the names of the competitors.

Prior to the Reverse Auction taking place, a Request For Quote (RFQ) and the “rules” for the bidding event (e.g., starting prices, bid decrements, bidding event length, etc.) are sent to the prospective suppliers giving them ample time to prepare for the auction. There is a detailed training session that will walk the suppliers through all aspects of the event, software and answer any questions that the suppliers may have.

The opening price is set before the auction date and the bid decrement is set to a specific amount requiring the supplier to lower each subsequent bid in multiples of this amount. The Supplier would need to submit additional information set forth in the RFQs, which can be included as a comment with each bid, and will be discussed during supplier individual training session or the supplier may submit this information within the specified timeframe, usually 48 hours, prior to start of the auction to the buyer.

The close time may be extended based on overtime rules. For example, if there are less than 2 minutes remaining for the event to end and a bidder places a bid the event will extend an additional 2 minutes. This will continue in the same way until no additional bids are placed,